Meditations on the sacred page and other books

I’m reading Redeeming Economics by John Mueller. I can’t resist a book that claims to correct contemporary economic theory by appealing to Aristotle, Augustine, and Aquinas. Here’s an interesting excerpt:

Neoclassical economic theory therefore offers no set of principles for deciding the most ordinary political questions affecting income distribution, such as whether the government should tax income or consumption, or whether specific deductions like the personal exemption ought to exist at all and, if so, how large they ought to be. The logical political counterpart to neoclassical economic theory, which attempts to reduce everything to utility, is realpolitik, which reduces everything to raw political power. Policymaking, in this view, is merely the result of the relative balance of power between those political factions which stand to gain or lose from the policy decisions. The theory of “public choice” has made this Hobbesian premise explicit.

The practical consequences can be observed in American government …. Both major political parties have theories of economic policy that are often little more than thinly disguised special-interest pleading. Generally speaking, the Democratic Party represents the interests of persons who have significantly more human capital and own less property than average: not just union members and recipients of government benefits but also members of the news and entertainment media, health-care professionals, college professors, government employees, and trial lawyers. The Republican Party tends to represent the economic interests of those who own significantly more property and relatively less human capital than average: not just those with inherited wealth and members of the National Association of Manufacturers but also the thriftiest middle-class families, owners of mom-and-pop small businesses on Main Street, and retirees whose incomes depend on savings invested in stocks and bonds.

Neither party today has a coherent theory for determining economic policy. The practice of each is to tax the constituents of the other party while favoring its own constituents. In the Republican Party, the prevailing theory defines tax neutrality as a tax code that exempts property income while taxing only labor compensation. In the Democratic Party, tax fairness is defined so that any change must increase the progressivity of the tax burden—which, given the nature of income distribution, relatively advantages labor compensation and disadvantages property income.